Inside the Big-Money Marriage of Simon & Sons, Massey Quick

STEWART MASSEY:  What we're trying to solve for is what's better for our clients and for our [staff]. [The merger] had to give us more depth and breadth to bring to our clients. Culturally, this is a perfect fit. It also provides better visibility of career paths for our people. It helps us in succession planning because it spreads equity ownership among more members. We're formalizing a succession plan that will likely entail the ability of members of [the Massey Quick] team to purchase equity.

Certainly your own personal wealth plays a big part in your capability to serve clients in like circumstances.

QUICK: The Simon family has had lots of homes, boats, planes; and I've had some of that experience in my family. We've all had problems with children as well. So being able to sit and talk to a client, and [empathize] is very comforting to clients. You can really add a lot to people's deliberations if you've gone through all those things too — good and bad.

The William E. Simon Foundation is sunsetting. In 2011, its assets under management came to more than $97 million. What's the total now?

SIMON: About $56 million. We're giving away close to 15% of our assets [per] year. It was Dad's intent that the assets be distributed during the lifetime of the people that he knew — seven on the board are his children, and three are very close personal friends of his.

How do you decide who the recipients will be?

SIMON: When we get requests, the reactions of everyone on the board can vary. But one reaction that never varies is: "Would Dad do this?" We all look at each other and ask that. It seems to be a rule that we're all very comfortable with. We'll probably continue to make gifts for the next five years. After that, I'm not sure.

Does that rule apply when you make decisions that don't involve the foundation?

SIMON: No. My father taught me a lot, and his instincts were excellent. I've used what he taught me. But every day is a new day. The world is different [now]. Every cycle is different.

How else does the merger benefit WESS?

SIMON: As a single family office, we acted as an RIA for our family, but we couldn't take in another client because if it wasn't someone that had $100 million or $200 million, the expense of adding that registration status to the business [was very high]. People would come to us and say, "We have $10 million. Can you help me?" I'd say, "I'll look at your portfolio; the advice is free." Now, not only can I bring those friends and acquaintances in, but we have a product for the client and can charge for it. We can literally use our address books to continue to build a very meaningful business for Massey Quick Simon.

I assume that the people you're referring to are high-net-worth and ultra-high net worth friends, business associates and colleagues that you've met over the years in serving on investment committees, for example.

SIMON: Yes, that and with Dad's longtime reputation in the financial world. So the network is quite large and substantial.The services that we strongly feel we do a good job in are not really on the investment side or advice-based. They're financial, tax and legal services — and are somewhat mechanical. But, for instance, we file 220 tax returns, [some] required for [reaffirmation of] corporate validity a few times a year. High-net-worth clients are very concerned about liabilities that could affect the other parts of their life. That's why you have all these entities to insulate yourself.

What will your brother Bill Simon's role be? In the past, he ran the family foundation.

SIMON: Bill is going to be a part of [Massey Quick Simon]. He's an investment professional, like me. He just does it out of our L.A. office. He and I went to work for my father in 1988 to help manage the family assets. We don't make any investment decisions independently of each other. It's a true partnership. We're co-chairs and trustees of the foundation, which Jim Piereson [a senior fellow at the Manhattan Institute] now runs day to day. The [expanding] L.A. office will be used by Massey Quick Simon to look for opportunities not only for clients but money managers. Bill has an extensive network because he ran for [California] governor. He almost made it, but not quite.

How long have you all been discussing the possibility of merging?

QUICK: We've been talking about it and thinking about it, probably, for three years. But it really came together and got legs in the last three or four months. We all agree that the most important thing is culture: Could we see ourselves sitting together managing the firm, sitting in front of clients and telling the story?

Mr. Massey, as chief investment strategist, please discuss your outlook for the market and the economy in the second half.

MASSEY:  We're long-term investors. In the equity markets, we take a three-to-five-year point of view. We remain fairly constructive on equities, and we're at or close to full allocation in most of our client positions, within the confines of investment policy statements. That's because we believe the economy is getting better.

On what do you base that?

MASSEY: Corporate America is in fantastic shape: Balance sheets are strong, cash flow is strong, employment has improved tremendously. We're starting to see wage growth. We're relatively constructive on the direction of the global economy. We're expecting the pace of growth to pick up. Europe is probably two to three years behind us in terms of their recovery.

It's surprising that more family offices haven't merged with wealth management firms.

MASSEY: They should. This may be a breakthrough type of transaction. We'll see.

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